DC Must Adopt Sense of Urgency for Impending Spectrum Crunch

The disaster film 2012 depicts a series of cataclysmic events—including tsunamis, earthquakes, and super storms—that threaten the survival of humanity. Although these crisis events are fictional, there is a very real crisis looming over U.S. innovation and economic growth: The government’s failure to address the wireless spectrum crunch.

Wireless spectrum is the backbone of wireless services and the U.S. wireless industry, carrying through the air the signals that enable voice calls, text messages, photos, and videos on mobile devices. Just as a larger water pipe means more water can be delivered, more spectrum means more capacity for a better signal and better wireless service on a mobile device.

Use of the wireless spectrum is controlled by the Federal Communications Commission, which allocates and licenses the largest portions of the spectrum to radio and television broadcasters and wireless companies. Additionally, the U.S. government controls a large portion of spectrum for military and scientific uses.

‘Unpleasant Political Consequences’Companies and government can buy and trade portions of the spectrum. The U.S. government can also sell spectrum rights to bidders through incentive auctions, which have been in use by the FCC since 1994.

Although the U.S. government can reassign the use of a license, that rarely happens. As Richard Bennett, a senior research fellow at the Information Technology and Innovation Foundation explains, “While the FCC has the legal power to unilaterally transfer licenses between applications, the exercise of this power can have unpleasant political consequences, especially when the loser of the spectrum license is armed with a megaphone aimed at the electoral process, as is the case with [television] broadcasters.”

Although the commercial use of wireless spectrum in the United States is regarded as the most efficient such use in the world, exponential growth in consumer demand for wireless service, especially for mobile broadband, will quickly outpace carriers’ network capacity. The number of wireless subscribers has jumped from 55 million in 1997 to more than 322 million today, according to wireless industry data.

This growth will continue as the shift to wireless services continues, along with the advent of new data-hungry smartphones and tablet computers.

No Decisive ActionDespite the billions of dollars wireless carriers invest in acquiring spectrum and improving spectrum efficiency each year, more must be made available soon to keep up with growing demand for wireless services. If not, U.S. consumers could experience a severe mobile service crisis, a spectrum capacity crunch that interrupts the innovation and economic growth wireless makes possible.

Recognizing the importance of wireless spectrum, the 2010 National Broadband Plan calls for the allocation of 500 MHz of additional spectrum to wireless needs. Of this, the NBP says 300 MHz should be made available within three years. President Obama issued a memorandum in support of the NBP spectrum goals.

However, despite the clarion call for action from the President, the U.S. government has failed to take any decisive action on this time-critical issue thus far. Although the FCC has the authority to reallocate spectrum, it rarely does so.

Reallocation to Wireless NecessaryLegislative attempts to address the problem have also gone nowhere fast.

In November 2011 the congressional “Supercommittee” considered but failed to adopt a deficit reduction plan that included authorization for the FCC to hold incentive auctions to reallocate spectrum. Several members of Congress have introduced standalone legislation authorizing incentive auctions, but these bills have not seen floor action due to opposition from broadcasters and political disagreements over how to structure the auctions and whether to set aside a large portion of spectrum exclusively for public safety.

Current spectrum license holders, mainly television and radio broadcasters, have opposed spectrum proposals they do not view as “entirely voluntary.” The broadcasters also question the wireless industry’s claim that a spectrum crunch currently exists.

Independent research suggests the wireless industry is correct. Bennett writes, “Ten times more Americans use mobile phones than watch over-the-air television, yet [television] broadcasters have exclusive rights to more spectrum than the four largest mobile networks.”

Clearly, some reallocation from broadcasting to wireless is necessary, and soon, to keep up with growing demand for wireless and prevent a crisis in capacity.

‘Politically Neutral and Effective’Spectrum auctions are a politically neutral and effective way of addressing critical spectrum needs. As Bennett correctly notes, “When the right to use spectrum is offered to bidders on equal terms, the market expresses itself in the form of bids that represent expert judgments of spectrum’s economic value to application providers.”

Market-based solutions are the most efficient mechanism for allocating goods, which is the primary reason why the American Legislative Exchange Council endorsed such a mechanism in the early 1990s for addressing spectrum allocation. It is time to ignore the fantasy that there is no spectrum crunch and move forward with incentive auctions and other market-based solutions to provide more capacity.